Buying a home can be an overwhelming experience, especially for first time homebuyers. There is a lot that can go wrong if just one step in due diligence is missed. We know that title agents and other real estate professionals are constantly trying to find ways to educate their buyers on the basics.
One hurdle that a lot of our clients had to get over was explaining it so that a cost-conscious buyer sees the value of a Municipal Lien Search. Our goal is to arm you with tools to help buyers understand and make them smarter and savvier consumers. The following bullets provide you with the basic talking points.
Municipal Lien Searches will reveal unrecorded property issues
Have you ever been asked this question? I could tell you in a series of pLog posts, but the simple way to explain it is this:
A Municipal Lien Search is checking with various city and county departments to see if there are financial or permit issues that will stick with a property after it's sold. These issues are considered to be "unrecorded" since they will not show up in the public record or a traditional title search.
What kind of issues will stick with the property after closing?
Of course, your title search will discover any true liens, which are recorded with the clerk of court, but a municipal lien search is really looking for outstanding problems that may or may not result in a lien -- but are expected to be paid by a new owner. By nature, they're significantly harder to track down and can carry really big risk if left undiscovered.
- Code enforcement violations - When owners don't follow ordinances, code enforcement departments will fine them. Some fines accrue daily and will never be recorded as a lien, but keep totaling up until the issue is corrected. This is especially common on "problem properties" like short sales or foreclosures. Common code enforcement violations Include unmowed lawns, abandoned/neglected vehicles, not clearing yard waste, and many other things depending on the municipality.
- Unpaid utilities - Whether or not a municipality will lien for unpaid utility balances is up to the municipality. However, if you're purchasing a home and inhereting an outstanding water bill of $1,500, they expect YOU to pay it. Wouldn't you want to know if you were walking into someone else's debt before buying a property?
- Open and Expired Permits - Permits that aren't properly closed out could result in fees and fines for the new owner. What's worse is that a new owner will often have to track down the contractor who originally opened the permit, have the work completed and inspected, and then closed out propertly. This is a costly and time consuming issue to deal with after closing, especially if a buyer assumes that the typical inspection will catch these kinds of issues. Most home inspections won't find issues related to municipal building code violations or open permits.
- Taxes - If a previous owner missed property taxes, it's going to be a new owner's responsibility if you aren't checking for it before buying.
Why is a third-party like PropLogix needed?
Your title agent is juggling so many parts of the closing, and companies like PropLogix specialize in looking for these issues. Experts will know WHERE to go for the information, exactly how to ask, and have developed relationships with municipalities to help get it back as fast as possible.
There is no standard for how each municipal department records this information. If it was simple, everyone would do it.
Plus, if we miss something, we're going to back it up with our $2 million E&O policy.
Can't I do my own lien search?
You could certainly do it yourself, in fact, we go over how to get started on a municipal lien search here. But as I mention above, it's a lot safer to leave this up to the experts than to take on the risk yourself.